Currently,you own 7 percent of the outstanding stock of Metals Unlimited.The firm has decided to issue additional shares of stock and has given you the first option to purchase 7 percent of those additional shares.Which one of the following will you be participating in if you opt to purchase the shares you have been offered?

Question

Quizplus · Accepted Answer

In a rights offer, existing shareholders are given the first option to purchase additional shares of stock in proportion to their current ownership percentage. In this scenario, the option to purchase 7 percent of additional shares matches the percentage of outstanding stock currently owned by the individual. Neither a red herring offer, private placement, IPO, nor general cash offer would match this specific scenario.

Currently,you Own 7 Percent of the Outstanding Stock of Metals